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Lenders use the gross debt service ratio (GDS) to determine the amount of your mortgage loan. Find out why it could affect how much mortgage you can afford.
Gross debt service ratio, or GDS, is one of two key calculations lenders use to determine how much money they are willing to lend for a mortgage. (The other is total debt service ratio, or TDS.) The GDS formula adds up the expected monthly costs for your new home, including the mortgage payment, heating costs, property taxes and, if applicable, a portion of your condo, rental or association fees. It then divides the total by your monthly household income. Your GDS must not exceed 39%, according to the CMHC.
GDS = (Monthly housing-related costs ÷ gross monthly income) × 100
Example: “If a couple with an annual household income of $120,000 applies for a mortgage with a monthly payment of $2,000 and they expect monthly heating bills and property taxes to cost $400, their gross debt service (GDS) ratio will be 24% ($2,400 monthly housing costs divided by $10,000 monthly income).”
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